Solid Waste & Recycling

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Waste industry growing pains

Waste industry pros sense there have been some fairly fundamental structural changes in the last 10 to 15 years. The degree of the perceived changes and their impact on specific businesses vary depending on the perspective of the observer, but the...


Waste industry pros sense there have been some fairly fundamental structural changes in the last 10 to 15 years. The degree of the perceived changes and their impact on specific businesses vary depending on the perspective of the observer, but there definitely has been a change.

For more corporate waste industry participants (those controlled by shareholders) these changes have been reflected in amalgamations, consolidation and the increased importance of corporate governance in day-to-day operations. From the point of view of closely-held or family-owned waste companies, change has come in the form of increased requirements to manage complex regulatory compliance and, at the same time, deal with greater competition both from large private sector and (to a degree) public sector players.

The Waxman case

Impacts to closely-held family-owned corporations are demonstrated by the (likely) final chapter in the Waxman vs. Waxman case. On April 30th the Ontario Court of Appeal released its decision in the appeal brought by Chester Waxman of the decision at trial of Justice Mary Ann Sanderson of the Superior Court of Justice. While the decision is extremely long (160 pages), with only small exceptions it finds squarely in favour of the plaintiff, Morris Waxman and related parties and rejects almost all of Chester’s appeal. (See various articles and news items about the case by this magazine by doing a keyword search at our website www.solidwastemag.com)

As the court describes, Isaac Waxman arrived in Canada from Poland in 1911 and created a scrap metal and “junk” business initially using a horse and wagon. By the time Isaac died in 1972, the company had become a multi-million dollar family business operating as I. Waxman and Sons Ltd. Isaac’s sons, Morris and Chester, had worked in the business since the 1940s and were a big part of the company’s growth through the 1950s and 1960s. Each owned half the company after their father had passed away.

Unfortunately, everything changed when the issue of succession arose. By 1988 the successful business relationship was replaced with a “powerful animosity that only a bitter lawsuit among family members can generate.” As a result, Chester and Morris, and their own sons, have spent much of the last 15 years and millions of dollars trying to prove they were cheated by the other.

The trial judge found almost entirely in favour of Morris. Justice Sanderson found that Chester had “duped” his older brother, Morris, out of his 50 percent stake in the company in December, 1983. The trial decision reinstated Morris as half-owner of the company and ordered Chester and his family to return his share in tens of millions of dollars in profits and bonuses since 1984. The trial judge also found that most of Chester’s defence and countersuit was “fabricated.” She wrote, “on the facts before me, I find Chester’s conduct meets, indeed, surpasses, the bar set…for malicious, oppressive and high-handed conduct deserving of public censure by the court.”

The Court of Appeal ended its own decision saying, “As we leave this case two impressions linger: the tragedy of a family shattered and this service accorded to the administration of justice by counsel and a trial judge, who, in difficult circumstances, performed their roles in exemplary fashion.”

The case is an example of how differences can cause large and dramatic feuds when the stakes are as high — a situation that’s not unique to the waste sector.

Changes in the waste sector

Until the last decade or so, the waste sector in Canada has been characterized by large numbers of small companies often owned by families or small businesses. While municipalities and some large corporations were involved in the sector, the prevalence of smaller operations in what was a fairly unregulated field led to a perception that it was a rough and ready industry.

For closely-held and family-owned corporations one of the chief reasons for change is evident in the 600 pages of judicial opinion of the Waxman case: money. With increased success come tensions which don’t exist when a business is small and modest. The often unfortunate aspect of family and small business is that when stakes become higher, the company is not equipped to deal with strife between its owners.

A second force is creating a new maturity in smaller waste companies: increased regulatory scrutiny. Small waste operations could once exist without being terribly sophisticated, but the advent of legislation and regulations over the last 30 years has meant that the cost of compliance is increasingly too high for small operations to bear.

Changes to larger corporate waste companies are related more to corporate governance. Regulators of the financial sector have forced large waste firms to pay more attention to governance. The increased scrutiny is related to particular examples of problematic dealings from some executives, but it is as much a result of Enron and similar controversies that relate to big business generally.

Dramas like that of the Waxman case will likely occur in the future but are less likely to occur in the waste sector than was once the case. Increased regulatory scrutiny (financial and environmental) will drive further maturation for those who stay the course.

Adam Chamberlain is a certified specialist in environmental law with Aird & Berlis in Toronto, Ontario. Contact Adam at achamberlain@airdberlis.com


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